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November 16, 2005

Every year the Finance Minister tinkers with the tax rates. But let him also focus on the collection strategy.

The income tax department is generally viewed with suspicion and there are many stories about corruption, extortion plus rude and irrational behaviour. Identical behaviour was the hallmark of DoT and the nationalised insurance companies. However there has been a sea change with the introduction of private operators in these fields. Both BSNL and LIC and it sisters are now far more user friendly AND efficient.

Let us adopt the same strategy for tax collection. Let there be Tax Collection Regulator ( like SEBI, TRAI, IRDA ) and let it license multiple private agencies for tax collection in each tax circle.

Each agency can be given a tax collection target and let them compete for 'business' from existing and potential tax payers. The finance ministry will set the tax rates and guidelines but the implementation will be done by these private agencies. Remuneration for the agencies can be on a licence fee + revenue sharing basis. Enforcement can be through civil and criminal suits filed with existing tribunals and courts.

The idea may sound initially ludicrous but with the passage of time would certainly prove to be immensely beneficial.